Japan Trade Data Weigh on European Shares

European shares fell on Wednesday, led by cyclical stocks on growth concerns fuelled by weak export data from Japan, but underpinned by expectations of more stimulus measures by central banks.

Miners, down 1.7 percent, suffered the most as poor results from global player BHP Billiton hurt sentiment. BHP fell 1.7 percent after shelving a $20 billion copper expansion project as it posted a 35 percent fall in second-half profit on weaker commodity prices and industrial action.

Other cyclical sectors, which generally suffer during difficult economic conditions, fell sharply, with autos down 1 percent, the construction and materials sector dropping 1.2 percent and banks down 0.6 percent.

"The market is down on renewed global growth concerns following weaker-than-expected exports numbers out of Japan," Robert Parkes, equity strategist at HSBC, said.

"A pause for breath would not be unexpected given the strength of the summer rally but with expectations, risk appetite and valuations all at very depressed levels, we still see more upside than downside risk to current market levels."

At 0814 GMT, the FTSEurofirst 300 index was down 0.8 percent at 1,101.18 points, after rising 0.4 percent in the previous session in volume at just two-thirds of the 90-day daily average. The volatility index surged nearly 8 percent to a two-week high, indicating a drop in risk appetite.

The euro zone's blue chip Euro STOXX 50 index fell 0.7 percent to 2,472.86 points, after hitting its highest level since April in the previous session.

"We are going to see some profit taking as volumes have come off in the past couple of days. Yesterday's higher close was on a lower volume, suggesting that the market is not that keen to buy at higher levels," Lynnden Branigan, technical analyst at Barclays Capital, said.

"If we start moving through Monday's low of 2,451, then probably we will see a pull-back towards a prior range low at 2,404. I expect some profit taking over the next two to three days before the market resumes its bull move," he said, referring to the Euro STOXX 50 index.

LOSSES SEEN LIMITED

Analysts said that expectations of some progress in resolving the euro zone debt crisis and stimulus measures from central banks could limit losses in equities.

The focus stayed on Greece, with Prime Minister Antonis Samaras seeking to persuade euro zone chief Jean-Claude Juncker that the country has the will to implement unpopular reforms and deserves more time to do it.

Investors also awaited the minutes of the U.S. Federal Reserve's most recent meeting due later in the day for clues on whether the central bank is gearing up for more policy moves to help the economy.

UBS equity strategists raised their rating on the European telecoms sector to "neutral" saying earnings momentum in the sector was improving and the companies remained attractive for their dividend yields.